THE Securities and Exchange Commission of Zimbabwe (Secz) is the body set up by the government to regulate and ensure the smooth running of securities and capital markets of Zimbabwe.
Secz was established in 2004 under an act of parliament: The Securities Act, which superseded The Stock Exchange Act of 1974. Operationally, Secz came into being on September 1, 2008 under the Ministry of Finance, with the mandate to create a safe and sound investment environment in the securities and capital markets of Zimbabwe.
Underpinning the role Secz plays, the body functions to create a transparent market, with information flowing freely between those raising capital and investors. Investor education is also a key function that Secz performs, ensuring more people understand what capital markets are, and how to invest. In order to understand more about Secz’s role, it is important to understand what “securities” and “exchanges” are.
When many people hear “securities”, they think about the sector pertaining to security guards and the like. In the investment sense, securities are broadly defined as financial instruments that hold value and that can be traded between parties. Examples of securities are stocks, shares or equities. These securities represent ownership of part of a company, and they can be traded through markets such as stock exchanges.
Other types of securities include bonds and unit trusts. Bonds are loans taken by large companies, and normally repaid normally over a long period of time- typically 5-25 years.
An investor might not want to hold that security for the full 25 years, so it can be traded through the markets. Unit trusts, also known as collective investment schemes, are where a group of investors’ money is pooled by a professional manager, who then goes to the market to buy the stocks, shares, bonds and so on.
Exchanges are platforms that facilitate the trading of securities. The main purpose of an exchange is to bring together buyers and sellers who hold these securities, and exchange them for money.
An informal environment where securities are traded between investors is called “over the counter”.
However, when tens of thousands of people holding the same securities want a transparent platform where securities are traded, exchanges become key. The most common exchanges are stock exchanges, where shares are sold. There are also other different types of exchanges, including commodity exchanges and derivatives exchanges.
A capital market is a market for capital; capital means money. Those who require capital are normally people in business. Therefore, capital markets facilitate the movement of people who have excess money through savings, to those who require capital. People with excess funds are investors, and those who require capital include companies or even government.
Secz regulates the trading of securities, and also registers all investors who take part in this market. The movement of money from investors to those that require the capital goes through many intermediaries, such as stockbrokers, asset managers, stock exchanges and custodians — and Secz also licenses and supervises operations of those parties. In doing so, Sec creates rules about how each participant in the ecosystem behaves. Secz also plays a key role in advising government in matters of capital markets.
Secz provides high levels of investor protection in order to fulfil its mandate. Investors place their funds in the capital markets, therefore Secz must ensure that these investments are safe. The regulator also works to reduce systemic risks. In so doing, Secz ensures if there is a crisis in one institution, it is contained within that institution as much as possible and does not destabilise the whole ecosystem.
Additionally, Secz promotes market integrity and investor confidence. For anyone to feel confident to invest in a market, they must be confident there are rules that apply to the market. Evidence of this regulation builds confidence and brings more investors’ participation. Secz ensures there is no market manipulation, and they work to eliminate fraud and financial crime.
l For more information, contact SECZ today: Block C Smatsatsa Office Park, Borrowdale Road, Harare.
Tel: (024) 2870081/ www.seczim.co.zw
This article was written as part of the Securities and Exchange Commission of Zimbabwe’s Investor Education Campaign in partnership with the Investor Protection Fund (IPF). For more information contact: firstname.lastname@example.org